City gas utility Mahanagar Gas Ltd. (MGL) on Friday said it will acquire 100 percent shareholding of Unison Enviro Pvt. Ltd. (UEPL) for Rs 531 crore to enter new geographical areas for pursuing inorganic growth opportunities.

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"Mahanagar Gas has signed a Share Purchase Agreement with Unison Enviro Private Ltd and existing shareholders of UEPL (Ashoka Buildcon Ltd and an investment fund managed by Morgan Stanley India Infrastructure) for the acquisition of a 100% stake in UEPL," the company said in an exchange filing.

The 100 percent shareholding acquisition is expected to be completed upon receipt of Petroleum and Natural Gas Regulatory Board (PNGRB) approval and subject to fulfillment of terms and conditions, it said.

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UEPL is a private limited company incorporated on December 14, 2015, under the provisions of the Companies Act, 2013. The company has been authorised by PNGRB to implement the City Gas Distribution network in the Geographical Areas of Ratnagiri, Latur & Osmanabad in the state of Maharashtra and Chitradurga and Devengere in the state of Karnataka.

Ashu Shinghal, managing director of MGL, said the acquisition would help the company expand its network within and beyond Maharashtra and offer its quality services with safety to a broader customer base, thereby contributing towards the long-term growth of the organisation.

HDFC Bank Investment Banking was the exclusive Transaction Advisor to MGL. Kotak Investment Banking was the exclusive Financial Advisor to Ashoka Buildcon Ltd and the investment fund managed by Morgan Stanley India Infrastructure on this transaction.

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Ashish Kataria, director of Ashoka Buildcon Ltd and chairman of Unison Enviro, said the company believes this transaction will help UEPL leverage MGL's strengths to realize its full potential.

Brokerage firm Citi views the acquisition positively, despite the headline valuation of 6.4 times price-to-book appearing to be on the higher side. It calls the acquired City Gas Distributor to be in the early growth stage.

Citi also believes that the deal can improve MGL's growth outlook with proper use of cash and can also change the perception around the company's lack of growth aggression.

Shares of MGL are up 7.5 percent so far this year and Citi's price target of Rs 1,030 implies a potential upside of 13 percent on the stock.

First Published:Mar 3, 2023 9:34 PM IST